Despite COVID, Nursing Homes Look to I-SNPs to Turn Value-Based ‘Mirage’ into Reality

The average U.S. nursing home has operated in a kind of survival mode for the last year, with long-term goals around new clinical and reimbursement models shoved aside to tackle the immediate and persistent scourge of COVID-19.

That said, some facilities were still able to execute on previously developed strategies to enter the world of Institutional Special Needs Plans (I-SNPs), unique Medicare Advantage plans that cover long-term residents of nursing homes and other communal residential facilities.

As chief development officer at American Health Plans, Hank Watson has had a front-row seat to observe the pandemic’s effects on I-SNP rollouts; the Franklin, Tenn.-based company develops the plans through joint-venture partnerships with operators in nine states, while parent firm American Health Partners also owns and operates nursing homes across the Southeast.

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Watson joined SNN’s “Rethink” podcast to discuss the impact of the pandemic on the I-SNP model, and why both he and nursing home leaders still see concrete clinical and financial benefits to serving as both operator and insurer — with Medicare Advantage forming a rare bridge between the often diametrically opposed worlds of fee-for-service and value-based reimbursements.

Excerpts from the interview, conducted late last month, are published below; for the full episode, check out the full episode on Apple Podcasts, Google Play, or SoundCloud, and be sure to subscribe so you never miss an episode.

How has COVID-19 changed the I-SNP calculation for providers?

As you know better than anyone, COVID was the most impactful event to have occurred to the nursing home industry, and continues to be. There are obvious challenges for provider-owned I-SNPs in that environment — facility access and census, clinical execution. All this is occurring in a relatively new partnership, a joint venture arrangement among providers and American Health Plans.

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But I’d say despite those challenges of 2020, and continuing in 2021, with COVID and all the difficult moments, I would say the I-SNP model certainly held. It’s certainly been our experience for each of our five 2020 I-SNP plans.

They all have their own story, but overall, the model held. And what I mean by that is not just the CMS I-SNP model, and beyond the financial arrangements and considerations — the joint venture and the operating model that our partners at American Health have put together and put in place.

As a collective group, we were able to manage our hospitalization rates at around 3.5%. We were able to pay shared savings across our book of business at about a 25% clip over top of capitation. I think what really highlighted the challenges of 2020 was that structure, that day-to-day execution that was required to realize those results.

Obviously, we were executing in the most difficult circumstances. But an I-SNP is really a coordinated dance between the facilities, the operating partner, American Health in this example, but also the care management entity as well.

When you get into an operating environment like 2020, it stress-tests those relationships, and how that partnership is set up: Are the facilities fully committed to executing the model of care? Is the care management entity integrated with the plan in a way that it can be responsive to the changing environments that we’re facing? Is the plan operations partner willing and able to be creative and flexible with the realities that a facility may be facing on any given day? And then is the joint venture itself set up to ensure that everyone is thinking long-term, providing proper governance through difficult patches and pulling their own weight?

Two examples. We had one plan at launch just prior to COVID hitting. We had our trying days, for sure, but the organization that we partnered with was well prepared. They had contracted I-SNPs previously in their homes, so they trusted the clinical model, and knew there was a lot of value being left on the table by not being a provider-owned arrangement.

They partnered with us, and they worked openly with our care management entity to expand the program into their homes, and navigate the many challenges that fell on us just two months into launching the plan. And the result was: They were able to get some shared savings results out of it, and we’re now looking to continue to grow and expand the membership and double that this year.

Conversely, another plan of ours that was probably most impacted — our collective plan was a lot of rollout of facilities, for a number of reasons, was to occur in Q2. So obviously COVID delayed those rollouts, as everybody was digesting the new realities around them, and that pushed back our plans for scale by a good six to nine months. But the partnership remained open, communicative. Everyone took it a day at a time, and we’re now executing on that backlog of growth, looking to bring in additional partners and execute on geographic expansion.

The model is there. The model works. It’s founded in a much more improved model of care. But the partnership does need to be patient, collaborative, transparent. Those are the nuances that are really important. We spend a lot of time talking about facility economics, and the blocking and tackling, but it is a partnership — and that part of it matters as much.

Let’s say I’m an operator who’s still curious about I-SNPs after all we just saw over the last year — what are the potential advantages to jumping in now, even with all the uncertainty surrounding the sector?

The benefit of the I-SNP is: You’re ultimately getting to the top of the food chain and controlling the Medicare dollar. So while it could be a long-term strategy in terms of positioning your nursing home organization higher up the food chain, and in terms of engagement in the health system and your local market, on day one, you’re getting premium payment from CMS monthly. You’re getting capitation to your facilities monthly, so the immediate cash flow effect is positive.

Additionally, you are getting access to that model of care immediately. There may be long-term strategic implications, but you’re not taking a step back financially to go forward in this model, which is appealing, and there is a cash flow component to this that is positive with capitation.

What we’re seeing in terms of folks looking at participation, and new plan activity — despite all the challenges of 2020 and census pressures and the like, the provider-owned I-SNP membership did grow entering 2021. I think a lot of that new plan activity was momentum through pre-COVID discussions and efforts, given the cycle that CMS requires.

But one of our new partners in Texas — a new market we’re in — a real sharp CEO, at the moment the height of uncertainty in May and June, she pointed out that she viewed COVID as evidence of the need for the I-SNP model of care. She was doing everything she could clinically to manage these residents in their home, which, of course, is the nursing home.

That said, as we’re looking into the future here in 2022, I think what you’ll see [driving] a lot of activity is depth in the market. Take American Health Plans, for example. We’re now in nine states, so an emphasis will be creating depth in those states through filling out opportunities with existing partners. Maybe your operations are in 40 counties, but you initially go live in 20, so you have the opportunity to fill out that opportunity by expanding geographically, and then also engaging new interested participants in those markets.

That’s a tremendous advantage for a group that maybe is operating, in this example, in Texas — rather than having to make a decision a year and half out to begin to develop and operationalize through all the steps required to launch an I-SNP, there’s one now operating in their market. And the opportunity to engage and plug in, effectively day one, it cuts down on that lag time to engage with the I-SNP and realize that economic and clinical opportunity.

I think the other component that we’ll be focusing on, certainly in those markets, is expansion of our product offerings: You can also expand into an institutional equivalent setting, ALFs and the community and the like.

Then for the groups that are emerging, with the vaccinations and a little relief — maybe just the need to look forward after 10 months of battling day to day. Those conversations are focused on 2023 new plan opportunities, and so there’s some time to get up to speed and create that strategic plan for those organizations around a new plan.

Logistically, how has the I-SNP rollout changed? Historically it’s been very hands-on, between implementing new care strategies and marketing the plans to residents and their families.

When we talk about I-SNPs with partners and potential partners, the nursing home owners, what they’re seeking from the I-SNP is a vastly improved model of care, the capitated cash flow, and the opportunity for shared savings. To access those three things, the provider-owned I-SNP has to deal with really two factors at a high level. We call it capital and execution.

What you’re asking about is the execution piece. On the capital side … yes, you’ll need your $1.5 million, $2.5 million in statutory capital; you’ll need a couple more million to get stuff stood up and get to scale. But the syndication allows for a lot of flexibility from the nursing home side. We’ve got partners in for less than $500,000 that are still realizing those three goals of the I-SNP — the model of care, capitated cash flow, and shared savings.

On the execution, that really boils down to enrollment and hospitalization, if you had to summarize it. If you execute on those two points, the rest will follow. But there’s a lot that goes into those factors, and to your point around launching the program and marketing it — that’s where we believe a very integrated model between sales, clinical field operations, and back-office health plan operations is really beneficial.

I think as providers are continuing to look at this model, [the questions have evolved from]: What is an I-SNP? To then: What’s the map on capitation, relative to fee-for-service? The next step is: What’s the operating model here?

So 2020, to your point, put a lot of stresses on that. But we were able to navigate the move to virtual enrollment, navigate the move to virtual facility education leading up to launch — and really ongoing facility education, because you always have a new administrator, or you’re constantly enrolling new admissions and educating the facility on that process. A medical director inevitably will have questions about the program that you’ll be addressing and wanting to collaborate with.

All those things, of course, move to a virtual environment. But I think a program that had a comprehensive operational approach allowed for us to pivot and make that work, so that the end result — the last step of the enrollment process, talking to the resident or the POA — didn’t change in terms of 80% uptake when you get to that point.

Of course, the challenge was getting to that point through facility education and virtual engagement of those residents and the POAs. But we’re able to navigate that through a comprehensive and clinical effort between operations, the care management team, and the sales team.

Let’s drill down on the clinical piece of this, because I feel like most of the attention centers on controlling the Medicare dollar. What are some of the challenges and benefits of establishing the clinical component of the I-SNP model?

The clinical team has to be on the same page. This whole provider-owned model contemplates the nursing home being fully invested and having skin in the game, the operating partner being fully invested in having skin in the game. But what often gets left out is the care management piece.

If that is fragmented and cobbled together, for lack of a better term, through whatever’s in place already — or “let’s go find somebody in that local market that can can fill this void” — that model of care execution is where the rubber meets the road. All the conversations around capital, and shared savings, and enrollment — enrollment is driven by the model of care. If that’s not happening, you’ll feel that in all those different places.

For us, the only way to ensure that that is all aligned operationally, and with the facilities, is for that to be affiliated with the joint venture between the nursing homes and the I-SNP partner, American Health Plans in this example. We have an entity called TruHealth. They do a wonderful job; their entire focus is to execute the model of care on behalf of this I-SNP joint venture. 

That’s what they do every day: They work with the field operations team every day, they work with the facility folks every day to that end — so they’re not walking room to room, trying to put on a fee-for-service hat, taking that off, [putting on a] care management hat and trying to navigate different models. The whole idea here is to strip away the challenges of a fee-for-service environment, and the need for a nurse practitioner, RN model that requires 15, 16, 17 visits a day to a model that is intensely focused on the needs of the resident-member in the model of care.

If they need to sit with that member for two hours, that’s what they’ll do, and that’s what leads to the proactive care — and ultimately, the prevention of hospitalizations, ownership of calls on weekends, and doing it in a way that’s collaborative with the facility, collaborative with the facility’s medical director and the existing clinical team in place.

That’s the execution. That’s the magic of this model, and that’s where you have to have everybody fully invested. That’s why we put so much emphasis on that component of this, because nothing else works if you’re not executing at the bedside.

I hear from operators and analysts all the time about that tension between fee-for-service and value-based care — everyone knows payers are moving toward the latter, but with so many other near-term stresses, it can be hard to not focus your energy on succeeding in the current FFS world. Do you think we’ll look back and say COVID was the spark that finally pushed everyone into value for good?

I think the short answer is absolutely.

As an industry, we talk about provider-owned I-SNPs and I-SNPs a lot, and what gets lost in that is: What we are is a Medicare Advantage plan, and that’s a good thing. Medicare Advantage is value-based care. It is solid and growing. It is bipartisan. It’s going to be 50% of all seniors in America soon.

A lot of the uncertainty, I believe, in value-based care comes from programs that are partial solutions, or fragmented, or could go away or evolve over time. This is solid; this is top-of-the-food-chain, first-dollar premium from CMS. There’s nowhere else to go beyond this in terms of resources.

So when we’re talking about components of value-based care, we’re always talking about reaching into this premium dollar. What the I-SNP Medicare Advantage plan does is it puts the premium dollar in the nursing home owners’ hands. That’s it; that’s the entirety of it.

Now it’s on the owners, and on American Health Plans as their partners, to execute. I had the benefit of listening to some of your other podcasts, and you bring up some good points about the mirage of value-based care — and that goes away when you are controlling the premium dollar. It is on you to execute.

We talked about the model of care and investing at the bedside — that’s the choice we’re making in our health plans, to execute a model of care that reinvests that premium dollar at the bedside. But you’re the Medicare Advantage plan; you make those decisions. We think that’s the best use of that capital and the best return for our members and residents clinically, and for the facilities to get the shared savings.

But ultimately, you’re in control, and everything else is building towards that. The direct contracting model is an effort to replicate that in the fee-for-service environment, but ultimately, they’re building toward a situation where: Here’s the premium. Provider, it’s on you, and you can keep the shared savings if you are able to execute.

But at that point, the common conversation you have as nursing home owners — and we’ve had it ourselves with our 29 facilities — is: “If we had the resources, dot dot dot.”

This is it. These are all the resources. This is a full Medicare premium to work with.

So I think this is where things are building toward. I think the model that the industry has created, the nursing home owners have created, with this provider-owned I-SNP is a good one to mitigate some of the capital concerns, and to provide a model that can execute on this and keep the value in the nursing facilities. Is it challenging? Absolutely. But you’re in the game long-term if you’re a Medicare Advantage plan.

Regardless of what comes down the pipe next — which nobody knows over the next two, five, six, 10 years — you’re in the game if you’re controlling the premium dollar for your residents.

Folks in health care are always trying to find that pocket of residents or patients who are high-need and largely unmanaged, and when that occurs, vendors flow to that space to offer that solution of care management to the Medicare Advantage plans or to CMS. Nursing home owners are sitting on a million of those folks in their long-term care beds, and if nursing home owners and their partners like American Health Plans don’t manage that situation to their benefit and the residents’ benefit, someone else is going to eventually.

This interview has been condensed and edited for clarity.

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